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India jumped two places to emerge as the second most preferred destination for global Limited Partners (LPs) in 2016 but high entry valuations and weak exit environment deter investors, a survey has showed.

According to the 12th annual edition of EMPEA’s Global Limited Partners Survey, India is likely to see the largest inflow of new investment—after Southeast Asia—in emerging markets PE funds over the next two years.

The survey conducted by EMPEA, a global industry association for private capital, featured the views of 107 LPs on emerging markets private equity asset class. LPs are investors in PE funds.

“India has ridden an impressive wave of upward momentum over the past three years, experiencing the largest positive shifts in the LP attractiveness rankings in both 2015 and 2016,” the report said. “Increasingly bullish LP sentiment toward India coincides with rising fund commitments: in 2015, fund managers raised US$4.5 billion for India—the most raised for the market since 2008.”

India, however, falls to the fourth most attractive market when limited to assessment by LPs currently invested in Emerging Asia. This suggests that LPs less familiar with India are approaching the market with more optimism than those already invested, the survey showed.

While overall sentiment remains high, the survey pointed out that nearly a third of the respondents felt historical performance deterred them from investing in India. Weak exit environment was cited as a deterrent by 36% respondents and high entry valuations by 28%, the survey said.

The survey also found that China-focused funds are likely to generate the highest net returns, followed by funds focused on India and Southeast Asia. About half the LPs who took part in the survey expected 2015-vintage funds focused on these three markets to deliver net returns of 16% or higher, it showed. More than half the respondents expected net returns of 16% or more from China and India, while 47% of LPs expect the same from Southeast Asia-focused funds.

The survey showed that 30% respondents plan to either begin or expand investing in India over the next two years, relative to other emerging markets. This compares with only 7% who plan to reduce their investments.

Consumer goods, services and healthcare are the sectors that LPs feel are the most attractive in which to build exposure through emerging markets PE funds.

Besides, funds of funds and private markets advisors—many of whom are well-established investors in Asia—find India to be the most attractive market in 2016, followed by China and Southeast Asia, respectively, the report said.